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It's time for the Big Short (squeeze). 60% of shares were shorted Yesterday.
NJ legalized recreational pot last week.
ITHUF revenues rising exponentially.
facilities and assets, top shelf.
Time to refocus on a new opportunity.
Good luck...Boneride and the rest of the board!
Yeah, the kiss of death was the 13% hard money deal with Green Gotham. Hadley bailed on a lot of shares, so he probably did alright, the rest of management will do fine, the little house of shorts stock manipulators made out and of course GG gets the company at ridiculously low price, while common shareholders get crammed most likely to around 1 penny.
For future...Beware of:
Self serving egomaniac management
Opaque non GAAP bulls%%% financials
Acquisitions made to obscure performance
13% hard money deals
Weird shorting activity
If you see these things in the future, run for the exit...
This is my post from April...
Longerboard Monday, 04/06/20 01:09:29 PM
Re: FastMny post# 1846 0
Post #
1847
of 1975
13% hard money loans were an early indicator these guys were in trouble.
Financials were not GAAP and opaque.
Conference calls were misleading.
Hadley, long on wall street BS, lacking entrepreneurial heart and specific industry knowledge. Early sign when he, CEO, was dumping stock at 6. If he was the real deal he would have been buying.
The owners of the secured debt which defaulted, will probably wind up with the company or a white knight will come in...either way, most likely the company will get recapitalized and the common shareholders will get further smashed.
Always gotta keep an eye on free cash flow.
Sad story.
Not a pretty picture...from press reports, the business is no longer a going concern. It is in default. Ex-CEO being investigated for less than arms length transactions. Typically, next steps, recapitalization discussions ensue...how bad should we cram the common shareholders and unsecured debt holders along the lines of...cram them really bad or crush them, hmmm. If Hadley was the right captain for this ship he would not have been selling his shares or doing that cockamamy beneficial repricing of executive options, including his own. Those were clear warning signals.
Not a rosy looking picture. Bankruptcy might be just around the corner. As usual, we as common shareholders are on the bottom of the totem pole and if this is the outcome, may get a couple of pennies on the dollar.
I can hear the sounds of management blaming corona, but in reality, they have been promoting non-GAAP financials and making self dealing, hyperbolic claims about EBITDA and free cash flow for well over a year. So the class action suit will prevail, but there won't be much left for common shareholders. Very sad!
13% hard money loans were an early indicator these guys were in trouble.
Financials were not GAAP and opaque.
Conference calls were misleading.
Hadley, long on wall street BS, lacking entrepreneurial heart and specific industry knowledge. Early sign when he, CEO, was dumping stock at 6. If he was the real deal he would have been buying.
The owners of the secured debt which defaulted, will probably wind up with the company or a white knight will come in...either way, most likely the company will get recapitalized and the common shareholders will get further smashed.
Always gotta keep an eye on free cash flow.
Sad story.
The problem with career politicians. They don't have a clue how to run a business, which is what the USA economy is, one big business. Every minute is costing lives. The good news is, the pressure is too great and these dumb asses will get HR 748 done very soon.
also, looks like interest on debt obligations for covered period (probably 2 months). If that is the case, that's huge!
HR 748 will pass tomorrow providing corona emergency $'s to individuals and businesses which will help. People will have 1200 each to spend and ITHUF will be an eligible recipient for loans for employees, rent and utilities that will be forgiven which will help with cash flow and buy time for revenue ramp.
The only tea leaves that matter are related to free cash flow. It is interesting Hadley did not mention FCF in his comment on the Oasis action this morning. That seems negative.
Obviously Oasis is pissing their pants based on its analysis of the market/iAnthus as it relates to its $25M unsecured loan, which in the event of a bankruptcy will get whacked almost as hard or perhaps just as hard as common stockholders.
Gotham Green Partners 13% $100M debt is secured which means it will own the company in the event of a BK and unsecured debt and common will most likely get whacked.
At this stage, take a look at company cash position, then draw a line on a graph from that point to FCF positive and determine if the company has enough cash to reach that point, based on burn rate. If the answer is a solid yes, the common shareholders should be OK and the stock should move higher.
Do you know when the 4Q 2019 earnings release date is?
It is all about free cash cash flow. Listen to the call and read the associated press release and financial statements.
The interest rates associated with the $100M tranche were at distressed levels from the company perspective, ie, the rates sucked. The high rates reflect lenders perceived risk. Of course, the huge debt and high rates place a large burden on the company to perform in line with expectations.
The notion the CEO hasn't closed on the last tranche, could be a good thing, ie, company doesn't need the money because it has reached free cash flow or is fast approaching.
The fact they all jumped implies better regulatory environment. Also, won't be surprised if company doubles down on sales and free cash flow pronouncements based on 4Q results at it ramps up a lot of dispensaries. This guess will be reinforced if stock keeps positive momentum into next week.
Could be any number of things on the last day of the year...
* market makers balancing their books
* a positive company announcement coming
* company closing out the qtr with affirmative sales trajectory
* good news regarding free cash flow
* positive news coming regarding regulatory environment
Just guessing, regulatory picture looks better and sales trajectory confirmed which supports company pronouncements it will hit positive free cash flow this year. In a cash is king environment, positive free cash flow means everything.
The price of this stock at the margin is controlled by the market makers. The little house of shorts made a lot of money from 6 to 1.06...nobody on this board made money shorting because you couldn't short if you wanted to. During the long ride down short volume each day was 50% average and sometimes more and the LHOS were not accumulating. This means there won't be a short squeeze. You are right to point out short volume of 30%, much less than the average on the way down. LHOS has changed its algo's, which implies they see more positive macro environment than they had seen. This is borne out by increasing prices in other pot stocks. I don't study the pot macro environment lately (studying other things), but I imagine the pot big boys are seeing some improvement which benefits all pot companies in general. ITHUF can't get euphoric and take its eye off cash conservation.
Agree...these are the type of macro policy issues that will drive the industry and ithuf higher. If these 3 things happen ithuf moves higher. If more states legalize in manner LOTI suggests and the trend continues on an arc that clearly points to ending prohibition in a predictable time frame, be ready for the rocket launch, ithuf blasts off.
The stock will languish if the macro policy arc is fuzzy. It comes down to states driving positive momentum to end prohibition. If you can build a high probability confidence interval of over 70% over the next 2 years that will drive the industry and ithuf WAY HIGHER. If it is still fuzzy in 2 years, prepare the life boats.
In his gut, I guess Trump would end prohibition, but he has an election to win and pot is being conflated with opioids and vaping. He often acts on gut feelings. We'll see.
The independent director slate could be good, if they are truly independent. None have any direct pot experience as gleaned from announcement. Don't know how much they are paying these guys, but hopefully they will earn it.
Also, it won't be a short squeeze that moves this stock in a meaningful way
Something is cookin...MJ up over 6.5% right now. Good sign that ithuf is up 16% in unison. Happy days!
To determine if shorts are accumulating, check the % change from Oct 1 to Oct 15 report.
Don't know...but assuming it is, short interest is still less than 5%...very small %. It will be improved fundamentals that will spike the stock, not a short squeeze, IMO.
I think you are correct...that's less than 2% of shares outstanding...not enough to trigger a big price jump short squeeze. It will the fundamentals.
you would be correct if the shorts were accumulating the shorts and in the longer term a large % of outstanding shares were short, but that is not the case here. Longer term short interest in ithuf is very low...it is the daily % shorted that is extremely high, but the shorts cover in typically less than 3 days...they don't accumulate, keeping short interest low, meaning no appreciable short squeeze impact. Market fundamentals will turn this stock and if the fundamentals are positive, the LSOS will stop shorting.
For sake of argument...let's say volume is 1,000,000 shares on any given day and less than 100,000 can be attributed to retail customers (simple calculation, since retail can't short and short volume is very high each day). Algo's are trading against themselves and can put up whatever bid/ask stacks they want...got nothing to with retail traders they prey upon. One might think the algo's are written to spoof these numbers to get retail customers to react. They have the retail book the retail book, ie, they see all the retail bid/ask intended trades. It's like playing heads up poker and you can see your opponents cards and your opponent can't see yours. Who wins??
retail customers account for only a very small % of daily trade volume. If these folks stopped selling, it would stop the decline in its tracks.
I appreciate your opinion.
I guess this is a philosophical debate and reminds me of:
Bob Dylan, from Blonde on Blonde:
An’ she says, ‘Your debutante just knows what you need; but I know what you want!’
Stuck Inside of Mobile, with the Memphis Blues Again
Or maybe you are a Stones fan, from You Can't Always Get What you Want:
“but if you try sometimes you might find you get what you need.”
Needs come before wants in Maslow's Hierarchy of Needs.
9% in this interest rate environment is a reflection of high risk perceived by the provider of capital. 9% increases risk for ithuf, eg, it would be less risky to get 5% rates, because you have a smaller debt monkey on your back. Over 60% of ithuf share trades yesterday were shorted. Little Shop of Shorts algo's (robots) feel comfortable doing this in this environment as the timing of the market expansion has slowed, reflected in a downward movement of 80 from 52 week high. This problem is not unique to ithuf, it affects the entire industry.
Ithuf has been talking about NT and NJ expansion for a long time which was baked into its financials. Hadley looked at the current landscape and determined that the path to free cash flow was lengthening ( as is the case with all pot companies) and scrambled to lock in hard money cash to continue execution of the plan. I would do the same thing and call it a need, not a want. I hope ithuf is also reviewing all cash needs to buffer against further market delays. If the timeline doesn't continue to extend, the 9% decision will be a great move and current shareholders will be richly rewarded from these levels.
The LSOS is hitting all similar pot stocks in a similar way, big short trades daily, which indicates their bias, flat to down
If they didn't need the funds, they wouldn't have done the hard money deals at 9% when interest rates are at close to record lows. So they borrow the money at 9% and since they don't need it it sits in the bank and they make 1% on it. Makes no sense.
Why would Hadley do 2 hard money deals, the second for $20M senior secured debt? Obviously, because he knows the consequences of running out of cash and is very worried about reaching free cash flow in the next 15 months which implies GGP can leverage its senior secured position to the massive disadvantage of common equity holders.
To the extent the ITHUF window for loosening regulations in the pot space is 15 months, the sooner this happens and to what extent, will drive how quickly and how high the stock will go. In a very loose regulatory environment, the availability of capital will increase dramatically and its cost will dive much lower. Common shareholders will all become residents on Big Rock Candy Mountain!
WRT management, I don't know the organizational dynamics, only what I have read and heard in presentations. They all seem solid. Hadley seems like a smart, nice Wall Street guy who got way over his ski's regarding market development and "gotta be big" acquisitions. He is treating his awarded (not purchased) shares like an ATM, by selling, which puts downward pressure on the stock at the expense of common shareholders. These are all seriously wrong moves in this environment, where more appropriate behavior is hunker down and survive. With the team at ITHUF, it seems they could shuffle Hadley over to CFO and elevate another to CEO. I don't know if Beth Stavola has the skill set to run an 800 person company, but if she does, I'd lay my money on her.
To the extent that 51% of shares were shorted yesterday, the shorters aren't holding the shares for more than a few days and retail customers can't short tells me there isn't normal price discovery trading ITHUF shares and the price is being manipulated with a downward bias. It feels to me like the end of May when 1Q earnings were reported and the stock was about $4. It just started drifting lower to about $2.50 when 2Q results were reported end of August, about a 38% drop. It has dropped another 48% from 2Q earnings til now. That's 43% over the last 2 qtrs. If it continues at this pace over next qtr it will be at $.73.
I am no technical expert and a lot of things are weighing on the stock, but the bias still seems flat to down. If the overall market demand timeline isn't extended too long and if one gets too cute trying to pick the bottom, the stock will shift higher and some will be left chasing higher prices. It wouldn't surprise me to see $.73 but it also wouldn't surprise to see someone waiting to buy until that level, only to wind up chasing the stock to much higher levels.
+ It seems Hadley has put together a good team with a good strategy. He makes a great presentation.
- He seems to have a banker's aura but wants to be an entrepreneur. He has been off on the timing and his banker to banker presentations have reflected that. He recently emphasized the importance of access and cost of capital, as if his banker skills are an advantage, then he provides confusing non-GAAP financials (think Dotcom bubble), sells shares, makes a ridiculous decision on that management option plan repricing (he had to apologize and withdraw), sells more shares and makes 2 hard money deals that fly in the face of his banker person low cost of capital assertions. I like Beth (no affiliation to me, only what I have seen on line) who started her own company, did a successful exit, joined this team and has been BUYING stock. She is an entrepreneur who I think may have a better feel for the timing of the important issues and perhaps would do a better at the helm. Sorry Hadley, you shouldn't be selling stock which when the sale becomes public, the stock dives further, while your retail investors are getting kicked in the pants! And you should know better. In defense of Hadley, it is not all his fault, the entire industry is getting smacked. Many CEO's have screwed up the timing. So from ITHUF perspective, it is better to do these high risk hard money deals, than run out of cash. Welcome to Hadley's world.
The whole segment is suffering...if pot etf MJ starts going up significantly and ITHUF is flat or going down...that would be a bad sign.
ITHUF is essentially in a race to free cash flow, the amount of cash left after paying operational and capex costs...ie, the company is adding cash and self sustaining. If it get's knocked off that projected path, that would be bad.
It has been documented in the press that goodwill overhang is a problem for many acquisitive pot companies, including ITHUF. GAAP indicates goodwill must be reviewed annually, but I don't know if ITHUF follows GAAP. At any rate, it will probably have to write down goodwill at some point, but that doesn't imply bankruptcy. The write down is probably priced in, but the stock could take a hit if the ultimate amount is excessive.
The stock could float lower near term, but if the company is around when the general market improves, the company manages its cash efficiently and executes on its plans, the the stock will go MUCH higher.
The pot market and pot shares will take off at some point. It is all about timimg. Big boys are making calculated bets similar to the recent 13% convertible debt scenario ITHUF signed up for. Worst case for investor, market development extends, debt burden crushes ITHUF and since investor is in senior secured position, he winds up with the assets and common shares are blown out. Best case, market develops at reasonable pace, ITHUF covers its debt obligations and the shares blast off.
It is all about these fundamentals and your investment decision should be based on your confidence good things are going to happen in the next 15 months wrt market development.
In the meantime, the little shop of shorts keeps running its game. Short volume yesterday was over 65% (799,116 shares), yet the increase in total short volume reported to FINRA for the entire 2 week period was 289,461 shares with a total of 2.705M shares shorted on the final day of the reporting period. Less than 2% of the shares are shorted, meaning LSOS are in and out each day.
So it is not a short squeeze that will pop this stock, it is most likely the speed with which the market develops with a couple of caveats...
If the feds legalized pot today, this stock would soar today! Also if a big company or institutional investor took a big equity position today, this stock would soar today!
I assumed the company said they would be free cash flow positive in 2020 for a reason. To the extent it is not, it is burning cash. It is possible the free cash flow time line could extend all the while it is burning cash. If it extends too long, it will run out of cash. I imagine any further funding is based on milestones. It talked about $100M, but GGP is not obligated to lend them any more money. I hope company blows the sales numbers out and reaches free cash flow positive sooner than 15 month! As it moves definitively towards that goal, the stock will move higher!
Two quick points...
1. If the stock price/trading is being manipulated and shorting is restrictive to retail investors, any technical analysis does not apply.
2. Stock is trading down a little in a narrow range with big volume. Weird, in that this $100M story is big news. Company is in a race for its life with a 13% big monkey on its back to hit free cash flow in 15 months. If it wins, stock will go MUCH higher, if it loses GGP's investment is senior secured, they could wind up with the assets and the common shareholder's get squadoush.
The answer to the question, "How open will the market become in 15 months" should guide your investment decision. I don't know the answer.
The shorts are in and out each day, they are not holding their positions and therefore have no risk. Take a look at daily short report...
https://www.otcshortreport.com/company/ITHUF. Consistent huge short volume, over 55% on wednesday, 40% yesterday, yet the variance in monthly outstanding short is very low, a few % points. Since retail (ie, people on this board) can't short ITHUF, who is shorting every day?? Wednesday the stock traded between 1.90 and 1.70, 600,000 were shorted and very few of the shares were held overnight. In rough numbers, the Little Shop of Shorts (LSS) using its AI shorts 600,000, covers 500,000 and retail customers sell 100,000. The AI balances the LSS short positions continuously, so in this 24 hour period, it makes 20,000 or $5.2M annualized. If shorting 20 little stocks, that's a nice risk free business at the expense of the retail investor. It would be more fair if the retail investor could short as easily as LSS. Call up your broker and tell her you want to short ITHUF right now and see what the response is. Sorry, I no can do!
As I mentioned after the last earnings call, I took a big loss and sold all my shares at 2.55 because the info looked a lot like the opaque results from the previous earnings report. It is not uncommon for companies in high growth nascent industries to become overly exuberant, then pay the price when reality doesn't match the hype. In hindsight, reality suggests ITHUF paid way too much for MPX and ITHUF cash flow is being pressured. Reality is ITHUF just closed a 9% hard money funding. I am sure Hadley is a smart, nice guy with bonafides on wall street, but how does this translate to guiding a business through predictably turbulent waters? For starters, I am sure the folks on this board would agree, he needs to stop selling ITHUF and start buying meaningful quantities to add to the shares he was awarded.
Nobody has an accurate crystal ball. Mine has been recalibrated many times, but it appears the market is saying:
* ITHUF paid too much for MPX and will have to take a big hit on the balance sheet goodwill which hits earnings.
* The pot business is not developing as rapidly as the exuberant forecasts, which is reflected in the cost of capital of the most recent deal.
* The shorts are still in charge.
* Most companies have best case, average case, and worst case forecasts. Market is pricing in worst case and perhaps ITHUF should take notice and make prudent adjustments.
IMO, over time pot will become as legal and available as booze. So, it is just a matter of timing. If a company's timing is off, it will become roadkill, while those companies that thread the needle will soar. When will the feds decriminalize pot? Over the last year, it appears to me that timeline has lengthened which is reflected in ITHUF share price. If this is true, hopefully ITHUF can hold on long enough and soar. The ITHUF accumulated assets are going to produce huge returns sometime in the future for someone, hopefully for the current retail investors.
I blew out at $2.55 after a long ride down...Other uses for $'s. I wish Hadley had sent a signal to blow out when he did at $5.70 a couple quarters ago. haha Steady ride down ever since.
It is a long term play. They are making good progress on grow facilities and dispensaries, especially in Florida.
Needs:
* improvement general environment
* watch their cash
* execute to plan
* recruit institutional investors and big analysts
* Hadley should stop selling stock. Consider making Beth CEO
* More clarity on non GAAP financials. Seems like trade press and smaller analysts not on board with explanations. GAAP is always acceptable and clear.
* Manage goodwill on balance sheet
Good luck guys, Longerboard over and out. Go Army!
What year did you graduate from West Point?
big game against michigan next week
I like army -21.5 over rice to cover my ithuf losses! maybe hadley will bet me straight up. haha
The bullet summary related to the 2Q earnings looks pretty tasty, so why hasn't the stock bumped higher? I guess the following could have some impact:
* The general pot stock environment is down, probably because the sector got way over its skis in terms of how fast the market would open up.
* There is a lot of goodwill on the balance sheet, which is overhanging earnings.
* Market makers are manipulating the share price. Head fake the last 25 minutes yesterday, big spike in volume and price, only to sell back down lower. Short volume had be lower the last 10 days, then spiked yesterday. All strange and designed to make retail buyers think great numbers had leaked and an insider was buying.
* The recent 9% dilutive $50M cash raise is pricey in this environment, but it is much better than running out of cash.
* No institutional buyers, no buzz, no pop.
* Optics issues, Hadley selling shares at a 6 month high and that option plan issue was a train wreck.
But, but, but, the team seems competent and locked in and the operational performance seems acceptable. Hopefully the market develops reasonably in line with expectations and doesn't slow dramatically due to regulatory issues. Must manage cash appropriately and also must justify goodwill. A lot of risk but also a huge market opportunity. Management is reacting to typical nascent industry issues in a manner that should pay off in the long run.
It is hard to predict the timing of share price. It is not hard to predict this is a huge growth market and well run, large, well funded companies will capitalize on it. Ithuf has a chance of being one. $5.50 could happen pretty quickly, and it is not a bad return from $2.50. It will take a big institutional investor, institutional buying and coverage to punch it through $6 IMO, but it certainly could happen. If their margins suck on 8/27, cash on hand looks tight or they have a big write off of goodwill, look out below. I lean towards them tip toeing past these issues and painting a happy face on grow facilities, dispensaries and a revenue bump up.
The MPX deal just closed recently, so it seems to me it would be too early to start writing off the goodwill, which of course will hit earnings. However, some of the big weed companies have been getting hammered over goodwill impairment, which might be spilling over to Ithuf. You know...if Ithuf doesn't write it off now, they will have to in the future. That is not definite...MPX may drive the value in the future to justify the acquisition price...that remains to be seen. Other concerns, do they have the cash to execute...assuming they do, a nice bump in revenues, a recognizable institutional analyst buy recommendation, and reasonable margins could bump the stock up near term. Also, as I have mentioned, IMO the stock is being manipulated by the market makers. Daily, the stock moves around for no apparent reason, it will run up, then suddenly drop off, a shorters dream. Since retail customers can't short, and significant volume is shorted each day, the market makers, who are familiar with the book and trading patterns are shorting at the expense of the retail guys in their book. I'd be most comfortable saying, stick the stock in a drawer and come back and look at it in 5 years...should be flying high.
Sorry, don't know, but don't feel bad...if you check the media outlets like WSJ, Forbes, Barrons, etc, they all have different numbers for shares outstanding and market cap. Plus you have a bunch of warrants and options out there that fuzzy things up. I conclude the OTC doesn't require so much data from smaller stocks (under $1B market cap?). Not too worried, they have a baseline plan for milestones like revenues, dispensaries, EBTDA, cash and if they hit those the stock will go up irrespective of dilution.